BEST NEW COMMODITY ETF
WINNER: iShares Bloomberg Roll Select Commodity Strategy ETF (CMDY)
“No-K-1” ETFs have been a big trend in the commodity space recently—and for good reason. Few investors want to deal with the potential tax headaches that come with receiving a Schedule K-1 form, a requirement for anyone holding exchange-traded products structured as commodity pools (as many commodity ETPs are).
K-1 forms can be a hassle, often leading to late tax filings and higher tax bills for investors. Why deal with that when you can buy a no-K-1 commodity ETF, which provides nearly identical exposure without the dreaded K-1?
One such fund is the iShares Bloomberg Roll Select Commodity Strategy ETF (CMDY), winner of the Best New Commodity ETF award of 2018. It holds a broad basket of commodity futures, but is structured as a traditional 1940 Act fund.
In addition to doing away with K-1s, the awards committee liked that CMDY, though technically active, tracks the Bloomberg Roll Select Commodity Index, an index of 20 commodities, covering the agriculture, energy and metals sectors.
Commodities in the index are weighed based on production and liquidity. Additionally, futures contracts are selected to minimize contango and maximize backwardation, which should aid returns over time relative to a vanilla commodity ETF.
BEST NEW ALTERNATIVES ETF
WINNER: VanEck Vectors Real Asset Allocation ETF (RAAX)
VanEck has long been breaking ground in real assets investing, and in 2018, it did it again with the launch of the actively managed VanEck Vectors Real Asset Allocation ETF (RAAX).
Real assets are often touted as good portfolio diversifiers as well as being great for hedging against rising inflation, even if they’re also known as pretty volatile assets.
RAAX delivers a broad mix of real assets such as REITs, commodities, natural resource equities, MLPs and infrastructure in a portfolio consisting primarily of other ETFs. Unique to this strategy is its laser focus on defense—RAAX is designed with downside risk management and lower volatility in mind.
To that end, the portfolio manager turns to various technical, sentiment and macro indicators to make allocation decisions across various assets, looking for those assets with better expected returns. Those allocation decisions include the ability to move the portfolio up to 100% into cash or cash equivalents when market turbulence—volatility—picks up and downside protection takes over.
RAAX isn’t so much cheap as much as it is competitively priced in its segment. The fund has an expense ratio of 0.64% and is part of VanEck’s Guided Allocation ETF suite.